The July 2018, meeting between European Commission President Jean-Claude Juncker with U.S. President Donald Trump has done a lot of good, with both sides deciding to negotiate a further cutback to their respective trade tariffs.
In August, for the very first time this year, Germany’s business morale improved following a truce in the trade dispute between the European Union and the United States, with executives from the country’s companies less stressed on the possibility of a transatlantic trade war.
As per the Ifo economic institute, its closely-watched business climate index jumped to 103.8 on Monday, beating July’s reading of 101.7.
In July 2018, U.S. President Donald Trump and European Commission President Jean-Claude Juncker agreed to refrain from imposing tariffs on one another with both sides deciding to negotiate a further cut in tariffs.
“The truce between Juncker and Trump is clearly providing relief,” said Klaus Wohlrabe, an economist at Ifo while adding that as a result, Germany’s exports expectations had risen significantly.
Ifo’s August reading was the highest since February 2018 and marked the strongest monthly improvement since December 2014.
As per Clemens Fuest, Ifo’s chief executive, “The German economy is performing robustly. Current figures point to economic growth of 0.5 percent in the third quarter”.
Improved business sentiments
As per the results of a survey by IHS Markit, German companies were satisfied with their current situation with business expectations being revised upwards.
As per a sector-wise breakdown, the main support came from the construction and service sector with manufacturing and retailing trailing closely behind.
The purchasing managers Index also showed the private sector shifting into a higher gear, helped by strong services activity.
“The global trade dispute so far hasn’t turned out to be a sentiment killer,” said Alexander Krueger from Bankhaus Lampe. “Everything is pointing to a continuation of the robust upswing.”
Such was the strength of Germany’s domestic business sentiment that even Britain’s planned departure from the EU and Turkey’s lira crisis could not sway it.
“We expect full-year economic growth of 1.8 or even 1.9 percent,” said Lampe.
Ont he back of construction, private consumption and state spending, the German economy grew by 0.5% quarter-on-quarter during the April-June period.
However, the threat of a fullscale trade war between the United States and China could cause major damage since the growth of many German manufacturing companies depend on the U.S. and China.
“Up to now, talks and fears of new crises, trade wars or a sudden end to a mature cycle have only been talks and threats,” said Carsten Brzeski, an analyst at ING while adding that all those concerns have so far not made any significant dent on the German economy.